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A great majority of product based business woes can be stomped out in the earliest days of the brand concepting bu just ensuring the founder is truly developing the correct kind of Product Based Business.
White labeling is a common type of product development that is used when innovation is not necessary. A great example of this is brand Merch such as a collection of tee-shirts that a Soft Drink Company may release for super fans. In this scenario, the Soft Drink brand isn’t in the business of selling teeshirt, so it’s simply not good business for them to invest research and development dollars into creating a teeshirt line from scratch. Instead they will simply find an available tee shirt and add their logo and artwork – this is called White Labeling.
Stock blank products are selected by you and your branding/identity is fixed in pre-selected areas using a pre-determined list of colorways, materials, and techniques. The product is duplicated on the market without your brand name.
Private labeling is like the cooler older sister of White Labeling. With private labeling you would follow the same process as white labeling, but you’d have a far wider selection of options of how you could customize the product.
Using our softdrink example; the Soft Drink company could potentially work with a manufacturer to create a tee shirt using a specific fabric, and a specific color, as opposed to the White labeled option of just being able to add a logo.
As the retailer, you specify everything about the product—what goes in it, how it’s packaged, what the label looks like—and pay to have it produced and delivered to you. Compared to white labeling, these selections are based on a custom or much broader catalog of options.
Private labeling is a strong option if you are just starting because you can find good partners that can give you differentiated products, especially in the skincare industry.
Drop Shipping entails either a small amount of white labeling or no labeling at all. Drop shipped businesses take products from a certain location and deliver them directly to the consumer via a third-party transaction portal (Shopify, Etsy, Amazon, etc.).
This is the least ideal product-based business type* because you have no control over inventory and when your supplier suddenly decides to stop making products.
*UNPOPULAR OPINION ALERT!!
As the retailer, you will build the product from the ground up, starting from zero. In this capacity, you may be working with the same factory that issued white and private labeled products, but you are not selecting their stock or adjustable inventory.
Vertical product development is the most ideal product-based business type if you're in it for the long haul, because after running your business for multiple years, you can have the opportunity to own your manufacturing. By that we mean, you could build your own facility where you produce your own products exclusively. Pretty cool huh!? This is the type of PBB that we specialize in helping our clients build at The Product Place.
Licensing is an expensive endeavor but possible if your product idea may require mechanical or costly intellectual property (IP). When acting as the licensee, you will be effectively “leasing” another retailer/manufacturer’s IP to incorporate or use as your own product. Sometimes going the licensing route is necessary to avoid paying hefty fees for certain certifications.
Another option is to think about combining a mix of these product-based business types. For example, you can private label a skincare line but choose the vertical product development route for your packaging because you want to set your products apart from the market. There are always opportunities to blend and match these types to build the product-based business that works best for you.
Which product-based business type is the most suitable for you and why?
